
Contents
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1. Introduction 1. Introduction
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2. What Is the Non-State Sector in China? 2. What Is the Non-State Sector in China?
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2.1. The Non-State Sector 2.1. The Non-State Sector
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2.2. The Private Sector 2.2. The Private Sector
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3. Sustained Entry and Expansion of the Non-State Sector in China: Evidence 3. Sustained Entry and Expansion of the Non-State Sector in China: Evidence
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3.1. General Features 3.1. General Features
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3.2. The Non-State Sector in the Rural Areas—Township, Village and Private Enterprises 3.2. The Non-State Sector in the Rural Areas—Township, Village and Private Enterprises
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3.3. Emergence of the Private Sector 3.3. Emergence of the Private Sector
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4. The M-Form and U-Form Hierarchical Structures 4. The M-Form and U-Form Hierarchical Structures
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4.1. The U-Form Hierarchy of Eastern Europe and the Soviet Union 4.1. The U-Form Hierarchy of Eastern Europe and the Soviet Union
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4.2. The M-Form Hierarchy of China 4.2. The M-Form Hierarchy of China
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4.3. Reform Policies of Further Decentralization Along Regional Lines in China 4.3. Reform Policies of Further Decentralization Along Regional Lines in China
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5. The Costs and Benefits of the U-Form and M-Form Hierarchies and the Implications for Transition: A Preliminary Analysis 5. The Costs and Benefits of the U-Form and M-Form Hierarchies and the Implications for Transition: A Preliminary Analysis
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5.1 Economy of Scale, Specialization, and Industrial Concentration 5.1 Economy of Scale, Specialization, and Industrial Concentration
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5.2 Coordination 5.2 Coordination
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5.3 Responses to External Shocks 5.3 Responses to External Shocks
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5.4 Incentives 5.4 Incentives
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5.5 Commitment Through Decentralization 5.5 Commitment Through Decentralization
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5.6 Experimental Approach, Learning, and Institutional Changes 5.6 Experimental Approach, Learning, and Institutional Changes
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6. The M-Form Hierarchy and the Non-State Sector in China 6. The M-Form Hierarchy and the Non-State Sector in China
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6.1. Direct Effects of the M-Form Hierarchy on the Non-State Sector 6.1. Direct Effects of the M-Form Hierarchy on the Non-State Sector
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Incentives and Authority of Setting Up Non-State Enterprises Incentives and Authority of Setting Up Non-State Enterprises
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A Harder Budget Constraint for Non-State Enterprises A Harder Budget Constraint for Non-State Enterprises
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Horizontal Relationship Between Regions and Emergence of Markets Horizontal Relationship Between Regions and Emergence of Markets
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Development of Entrepreneurship and Use of Local Knowledge Development of Entrepreneurship and Use of Local Knowledge
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The Roles of the Central and Higher Regional Governments The Roles of the Central and Higher Regional Governments
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6.2. Interactions Between the M-Form Organization and Other Reform Policies 6.2. Interactions Between the M-Form Organization and Other Reform Policies
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The Open-Door Policy The Open-Door Policy
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The Dual-Price System The Dual-Price System
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The Success of Agriculture Reforms The Success of Agriculture Reforms
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7. Concluding Remarks 7. Concluding Remarks
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7.1 Denationalization of the State Sector in China 7.1 Denationalization of the State Sector in China
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7.2 Lessons for Other Economies in Transition 7.2 Lessons for Other Economies in Transition
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Appendix Appendix
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Notes Notes
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References References
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10 Why China’s Economic Reforms Differ: The M-Form Hierarchy and Entry/Expansion of the Non-State Sector
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Published:December 2017
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Abstract
China’s thirteen years of economic reforms (1979-1991) have achieved an average GNP annual growth rate of 8.6%. What makes China’s reforms differ from those of Eastern Europe and the Soviet Union is the sustained entry and expansion of the non-state sector. We argue that the organization structure of the economy matters. Unlike their unitary hierarchical structure based on functional or specialization principles (the U-form), China’s hierarchical economy has been the multi-layer-multi-regional one mainly based on territorial principle (the deep M-form, or briefly, the M-form). Reforms have further decentralized the M-form economy along regional lines, which provided flexibility and opportunities for carrying out regional experiments, for the rise of non-state enterprises, and for the emergence of markets. This is why China’s non-state sector share of industrial output increased from 22% in 1978 to 47% in 1991 and its private sector’s share from zero to about 10%, both being achieved without mass privatization and changes in the political system.
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